Nissan CEO Says Cheaper Yen Still in ‘Handicap Territory’

The Toyota Motor Corp. logo is displayed on the wheel cap of a vehicle displayed at the company's headquarters in Tokyo. Photographer: Kiyoshi Ota/Bloomberg

March 28 (Bloomberg) -- Carlos Ghosn, chief executive
officer of Nissan Motor Co., said the yen remains in “handicap
territory” that creates challenges for Japan’s automakers even
after the currency’s recent weakening.

Ford Motor Co., Chrysler Group LLC and the American
Automotive Policy Council, which lobbies on behalf of those
companies and General Motors Co., have said the yen’s decline
relative to the dollar in the past six months is a windfall for
Japanese carmakers. Such criticism ignores history, Ghosn said
in an interview at the New York International Auto Show.

“Before the Lehman Brothers crisis, we were around 110 yen
to the dollar, which by the way is the average of the exchange
rates” for the past 10 to 15 years, Ghosn said yesterday. The
yen peaked at about 75 to the dollar in 2011. “Now it’s at 94.
It’s just a correction from an abnormally high level,” he said.
“I still consider it to be in what I call handicap territory.”

The yen has weakened by 21 percent against the dollar in
the past six months. The slide accelerated since Oct. 31, when
Shinzo Abe, who became Japan’s prime minister in December,
advocated for the decline to aid his country’s economy. Morgan
Stanley has estimated the currency advantage generates about
$1,500 a car for Japan’s automakers, while their U.S.
competitors put the figure at about $5,700.

Ford’s Concern

Ford Chief Executive Officer Alan Mulally said March 26
that he’s concerned that the depreciation of the yen is
bolstering the competitiveness of Japanese automakers.

“The most important thing that most countries around the
world believe in is letting the markets determine the
currency,” Mulally said from Bangkok in an interview on
Bloomberg Television’s “First Up with Susan Li.” “That’s just
so important to all of us in the international trading system.”

Jim Lentz, head of Toyota’s U.S. sales unit, said changes
in the currency don’t affect how much the company spends on
incentives.

“The yen doesn’t determine how aggressively or non-aggressively we operate in the market place,” Lentz said
yesterday at the Bank of America Corp. 2013 New York Auto
Summit. Incentives for individual models are set based on where
products are in their lifecycle, consumer demand and relative to
competing models, he said.

At Ford, “We haven’t seen a dramatic increase in
incentives and frankly, in the near term, don’t expect to see
that” from Japan’s automakers, Joe Hinrichs, the company’s
president of the Americas, said at the same auto conference.

Yen History

“If you go back and look at when the yen has weakened in
the past, we’ve seen more content changes for the same price, so
adding content for the same price, as opposed to incentives,”
Hinrichs said. “If you have a lower cost base, you can content
the vehicle up and still have the same price and nobody says
you’re pricing, but you’re actually offering more value to the
customer given the advantage had by the yen.”

The yen’s strengthening in recent years didn’t make
economic sense and was a “huge handicap for all Japanese
companies,” not just automakers, said Ghosn, who also leads
France’s Renault SA. “It has to pass 100 yen to the dollar to
be in a kind of neutral.”

The yen this week has been trading at about 94 to the
dollar and hasn’t been higher than 100 since 2009, according to
data compiled by Bloomberg.

Nissan’s American depositary receipts were little changed
at $19.46 yesterday at the close in New York. They have gained
1.9 percent this year, as the Standard & Poor’s 500 Index rose
9.6 percent. Toyota’s ADRs fell 0.5 percent to $103.10. They
have gained 11 percent this year.